Daimler Trucks North America emerged as the shining start in Daimler Truck’s recent overview of its goals as a company independent from Mercedes-Benz – including a strategy leaning heavily on zero-emissions ambitions.
In a virtual Daimler Truck Strategy Day on May 20, Daimler Truck noted that it sells more than half a million trucks and buses in a typical year, with brands across all major continents.
But while DTNA dominates North America with a 40% market share in the heavy-duty segment and benchmark profitability, the parent company’s recent record in other market regions is less satisfactory. The inconsistent regional profitability records of Europe, Brazil and Asia need to be improved significantly, as speakers emphasized repeatedly in the presentation with the catchphrase, “Every region must deliver.”
“We have an opportunity to fundamentally raise the game of this company,” said Martin Daum, CEO of Daimler Truck AG. A change in organizational structure will give each region more entrepreneurial freedom to meet the unique needs of its market, supported by the parent company’s technology strength and economies of scale.
“Every region must deliver competitive performance, and we are willing to implement the measures necessary to achieve this goal,” Daum said. “We are willing to take hard decisions to lower our breakeven and raise our performance.”
In some regions, that may mean prioritizing profitability over market share, or prioritizing heavy-duty trucks over medium-duty. Daimler Truck said it will reduce fixed costs, capital expenditures and R&D spending by 15% by 2025 compared to 2019 numbers. That will include a personnel reduction target for Mercedes-Benz trucks and new measures to reduce complexity and streamline processes. The company said it will build on lessons learned during the COVID-19 pandemic on how to operate more leanly.
The separation and stock market listing for Daimler Truck are track, with completion expected by the end of this year, according to the company.
“Our mission as independent company is clear,” Daum said. “First, we need to reset profitability using a targeted regional approach. Second, we intend to lead the way in zero emissions.”
Daimler Truck is reducing its spending on internal combustion engines and pouring that into battery-electric and fuel-cell-electric vehicles. Daum stressed that the company believes the industry needs both, and that hydrogen fuel-cell-powered vehicles will be a must in order to move to large-scale zero-emissions long-haul freight transport. (See Daimler Trucks Focuses on Zero-Emissions Future)
Daimler already has made an agreement with Cummins to handle its medium-duty engines as it completely exits that business. And the company is actively seeking partners to share the development costs for internal-combustion engines to meet upcoming European emissions regulations, Daum said.
Daimler Truck also will put more emphasis on the growth of its aftermarket and services revenues to drive profitability and customer retention. This includes the traditional parts and maintenance service business, but also financial services such as leasing, financing and insurance New and fast-growing services in digitalized, autonomous, and electrified transport offer additional growth potential.
CFO Jochen Gotz promised “tailor-made services for every region and for every customer.”
Daimler Trucks North America: Strong to Stronger
“Our goal is to go from strong to even stronger,” said Daimler Trucks North America CEO John O’Leary, with plans to expand both market position and profitability.
One way it plans to do that is “furthering our technology leadership,” he said. “We can put more purposeful innovation into our trucks than our competitors, allowing us to command a premium for our vehicles.”
The company is turning to the less-cyclical and highly profitable vocational market for future growth, as well as to smaller and medium-sized fleets where it does not perform as strongly as it does among larger fleets.
It's currently the number one brand among on-highway large and mega-fleets, with 58% market share. And it's number one with on-highway small fleets, but with less dominance, at 33%. And for off-highway/vocational, it's at number two with 28% of an overall 130,000-truck market.
O'Leary said Daimler's goal in that vocational market is 45%. The introduction last year of the new Western Star 49X is just the first step in targeting this market – one that likely will get a big boost if a new infrastructure spending bill can make it through the political stagnation in Washington, D.C.
“The 49X is just the first of our new vocational products,” O’Leary said, and the company plans to take advantage of the timing with at least some level of infrastructure investment funding expected from Washington.
DTNA also will accelerate its zero-emissions strategy, focusing at least for now on battery-electric vehicles. The Freightliner eCascadia and medium-duty eM2 will start series production in late 2022, and the battery-electric walk-in van chassis from Freightliner Custom Chassis Corp. will begin deliveries late this year.
Unlike Europe, Daimler already has a strong aftermarket network, but it will put an increased focus on new service offerings and digital portfolio.
“We will continue our uncompromising customer focus to existing customers while doing the same for new ones in the vocational sector," O'Leary said.
Although it’s in a better position than its European counterparts (see below), O’Leary acknowledged that DTNA, too, has learned lessons from the pandemic.
The truck business is always cyclical, he noted, which the company is able to deal with through cost control and with its flexible manufacturing footprint.
“As the pandemic has taught us, our discipline here, dealing with recent supply chain challenges, serves us well in good times and even more so in times of uncertainly. We can maintain profitable cash flow and profitability even down to a 165,000-unit market, which hasn’t happened in our lifetimes.”
Mercedes Trucks: Europe “Unacceptable”
Mercedes-Benz Trucks, which operates in Europe and in Brazil, is under the most pressure to improve, while Daimler Trucks Asia and Daimler Buses are somewhere in between Mercedes and DTNA in performance.
In fact, Europe is the key to reclaiming profitability for Daimler Truck as a whole, company officials said.
Karin Radstrom, a previous Scania exec who took over in February as the new head of Mercedes-Benz brand trucks in Europe and Latin America, was pretty blunt about the areas they need to work on, calling the performance in Europe “unacceptable.” Market share has declined, the financial numbers are headed in the wrong direction, as is customer satisfaction, she said – and there may be the rub.
“We have great engineers,” she said. “That’s not our problem. We have been developing trucks with a little too much focus on technical perfection and not enough focus on customer needs and what they’re actually willing to pay for.
“We are changing metrics from being very market-share based to more customer focus.”
The company is shifting to involve customers more in the early stages of the design and testing process, something it has been doing with the electric eActros.
Being a separate truck-only company will also help with the customer service angle, she said. Currently, Mercedes dealerships in Europe sell both cars and trucks. The new structure will allow it to develop dealerships that focus specifically on truck sales and service as we see in North America.
In Brazil, she said, where the company has struggled with both internal and external challenges (including a high dependency on imported parts and a severe currency depreciation), a comprehensive restructuring and cost-cutting actions are under way. A new, localized version of the Actros will return higher margins.
Daimler Truck Asia: Growth Opportunities
Daimler Truck’s Asia operations, in Japan, Indonesia, India and China, is positioned for growth, said company officials, especially in China, which accounts for half of the world’s truck sales.
The market there is changing quickly, Daimler said, with a growing focus on fuel-efficient, low-emissions trucks with high safety standards. The company is well positioned here for volume strength, with a partnership with the Chinese company that makes the Aaman brand set to build Mercedes-Benz trucks in China.